RIMM: Citi Says Sell; BB10 Sell-Through, Services Rev Still Uncertain

By Tiernan Ray

Citigroup‘s Jim Suva this afternoon issued a note to clients reiterating a Sell rating and a $6 price target on shares of Research in Motion (RIMM) after the stock closed up $2.06, or 13%, at $17.90 following tantalizing remarks by its CEO Thorsten Heinsin an interview yesterday, and rising hopes for the BB10 software upgrade to the BlackBerry, which the company will introduce January 30th.

RIM will likely offer review units of new BlackBerry hardware when it shows off the software, and it is likely “sentiment to improve as launch date nears and carriers announce support.”

Following a nearly 51% rise just in the first three weeks of this year, Suva thinks the stock is not appropriately reflecting risks from competitors building phones based on Google‘s (GOOG) Android software, such as China’s Huawei, and he thinks investors should care more about sell-through of devices:

We are also not surprised by recent carrier announcements to support the new BB10 devices. We remind investors that carrier support is naturally expected given minimal risk on part of the carriers to support these devices [W]e remind investors that actual sell through matters to determine the true financial impact that the new OS & hardware will have on thecompany’s financials, especially in an increasingly competitive environment. Indeed, our own checks at CES suggested that several Chinese handset manufacturers including Huawei were coming out with attractive devices at very attractive price points ($150 ASP before subsidies) based on Android OS that could impact existing BB subs (especially in emerging economies) to consider alternatives as they upgrade. Our own checks have suggested that enterprises (comprise less than 50% of total 79mln subscriber base) will take at least 4-6 months to test the new BB10 OS and some likely to offer BB10 hardware as a BYOD option ieemployee choice vs. a standard option.

Suva also expresses concern the company is losing “highly profitable service streams as it materially and structurally shifts lower with the coming BB10 products, which will derive lower rates going forward.”

RIM’s BlackBerry network operations service makes up about 35% of total sales, writes Suva, but 75% of company gross profit.

Suva’s also not impressed with the company’s “Fusion” software, which it is positioning as a unified IT tool for managing devices of all sorts, including those from Apple (AAPL) and Google’s partners.

“We view the mobile device management and sandboxing technology remains an overcrowded area (Good Technology, SAP (SAP), Microsoft (MSFT), etc) and we remain skeptical about BlackBerry’s success in this arena.”

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There are 64 comments

JANUARY 22, 2013 5:44 P.M.

Ed wrote:

Enough of the Rimm BS. The stock is
a joke. He is right, the PT should be 6. Investors
are getting set up for a huge drop!!

JANUARY 22, 2013 5:45 P.M.

Anonymous wrote:

Incorporate a business

JANUARY 22, 2013 5:50 P.M.

AnnaInVA wrote:

$6.00 ? You short ??

JANUARY 22, 2013 5:51 P.M.

KT wrote:

looks like you got caught shorting RIMM... HAHAHAHA

JANUARY 22, 2013 5:52 P.M.

Anonymous wrote:

It is extremely ridiculous for an analysis to say sell all the way for a stock from $6 to $16. Eventhough this is a dead cat, you would not sell it when it bounds. I honestly think this guy is crying to cover his short position right now.

JANUARY 22, 2013 5:55 P.M.

Anonymous wrote:

Seriously, if you don't cover you short position, you are simply done. I give you a lesson for free today: Always follow the trends, dumb ass. It doesn't matter what it is, dead cat, or potential buys.

JANUARY 22, 2013 5:55 P.M.

voytek wrote:

Rim with BB10 platform is not just being supported by carriers by also by a large business community which has been proven through the 1600 bushiness that have jumped on the training wagon.
Numbers of users that have pre-registered for BB10 on various carriers sites has already grown into thousands.
As per comments from various user communities, we are all waiting impatiently to get our hands on this device. A lot of us are currently Android and iOS users, not just previous or current BB users.

I can't believe how many analysts just keep bushing this stock without actually properly looking at this company and what it has to offer now as opposed to their old platform. Old platform - old numbers. The new platform through the video leaks and information posts and BB world jams and the development community - everybody is behind this company and yet you don't see it.

You are paid by Google and Apple and this is why you don't want to see this company to succeed.

Long RIMM since $7/share. Go RIM! Go!

JANUARY 22, 2013 5:59 P.M.

observer876 wrote:

suva's analysis seems a bit dated. The fact that he mentions hauwei as a contender shows this; if hauwei is a threat to RIimm it is a threat to nokia, LG, Samsung and everyone else that does cost effective phones. But Rimm does both cost effective and high end phones and i dont see anyone buying a high end hauwei android device right now. So Rimm wil not compete with Hauwei exclusively, every manufacturer will be fighting for consumer $. As for the service revenue I uderstand the concerns here, but rimm is moving fast to address this, and I eve you did not mention this out of ignorance and not bias : 1. rim has mnore content in app store to generate money from. 2. new revenue streams from QNX car application. -before they only provided the base for the infotainment system, now they are providing the full infotainment software. 3. that visa NFC nod means the very hauwei phones that might crop up to compete with BB10 phones may actually use rimm payment backend infastructure. and finally you downplay Rimm's mobile fusion yet allude to an increase in boyd trend. Why would it be impossible for rimm; a company that currently dominates MDM not be able to control a piece of this growing pie. your price target is baed on old information. if rimm is at $17+ on expectation alone i see now way that this stock could fall back to $9 in the short term unless something drastic happens in waterloo.

JANUARY 22, 2013 6:00 P.M.

A Pull wrote:

If he sends out a note telling AAPL and NOK holders to sell because of Chinese manufacturers having low ASP's, and are a threat to them as well, then I'll pay more attention.

JANUARY 22, 2013 6:01 P.M.

svg1234 wrote:

Well, $6 is too low, but the runup has certainly been overdone. I got out way too early (with a profit). Didn't think it's hit $18 in January. Up $2 on comments that were already made many months ago? Ridiculous. It's all pump and dump Wall St. corruption. They'll let the air out at some point.

JANUARY 22, 2013 6:02 P.M.

Anonymous wrote:

What a joke the stock goes up 2 bucks to almost 18 bucks a share and he puts a 6 price target on it....Yea let me see Citigroup‘s Jim Suva thats who I want to take care of my 401 retirement fund...

JANUARY 22, 2013 6:03 P.M.

Joe wrote:

What a joke the stock goes up 2 bucks to almost 18 bucks a share and he puts a 6 price target on it....Yea let me see Citigroup‘s Jim Suva thats who I want to take care of my 401 retirement fund...

JANUARY 22, 2013 6:03 P.M.

SUVA is a Paid Troll wrote:

$6 price target, sure, RIM has $6 in cash per share. So this Suva idiot says all of RIM;s business is worthless.
Oh he works for Citibank where crooks work. Now I get it.

JANUARY 22, 2013 6:05 P.M.

Netpro wrote:

Is this Suva guy stupid or what? If you're this stupid, you simply should not be in the business of doing analysis of anything.

JANUARY 22, 2013 6:07 P.M.

JT222 wrote:

This analyst has zero creditiblity. WHo will you believe Peter Misek with $19.50 price target with potential $56 Price target or this clown. Never even heard of this analyst. He must have missed the RIMM train when it was trading low.

JANUARY 22, 2013 6:11 P.M.

voytek wrote:

RIMM's current price after market close today: $18.07 :)

Go RIM! Go!

JANUARY 22, 2013 6:11 P.M.

dan wrote:

the $6 dollar price target levied by analysts 6 months ago were because none of you really smart guys thought that rim would still be around at this point in time. I don't know if you read but in case you haven't noticed they are launching on the 30th with 2.9 billion in cash and people waiting in line for the next biggest thing. i feel sorry for the shorts no i take that back.

JANUARY 22, 2013 6:15 P.M.

Jamie wrote:

What a short sighted view. No Chinese android device will compete with RIM when it comes to RIM's main target customer. They don't have the security. If this analyst thinks RIM's chances end with low cost cell phones than he has not been doing his job. Also, no android phone has BBM, which is why they sell so many in the new markets.

JANUARY 22, 2013 6:16 P.M.

dan wrote:

I would have to say Ed that sounds like you may be the biggest joke of all. Sounds like you may be stuck short, you could make that money back if you switched long.

JANUARY 22, 2013 6:24 P.M.

Engineer wrote:

What a load of groupthink.

@ $6 RIM was trading below liquidation value and under the assumption it RIM is dead.

RIM has done a lot to turn the company around and has shown good execution going into BB10 and their new mobile operating system QNX. Now it is only trading on par with book value, with the assumption perhaps RIM is not dead. Sentiment is starting to change for Blackberry, so investing in RIM now becomes a qualitative issue only, not a quantitative one. Will RIM regain market share in the US? Who cares? Emerging markets like India are the new frontier and if RIM can sell a few units to its existing base and a few to these emerging markets, it will easily be a success.

From what I see RIM is far from $6 dead value and may even double again before year end.

JANUARY 22, 2013 6:24 P.M.

Anonymous wrote:

I thoroughly agree with Mr. Suva. But for now. I have to get some bloody dinner. That comes first. Then maybe an explanation later.

JANUARY 22, 2013 6:46 P.M.

Jamie wrote:

Anonymous real name must be Apple. Poor guy had to read all the reports of how the new blackberry is better than the iphone 5 in almost every respect.

JANUARY 22, 2013 7:00 P.M.

Anonymous wrote:

This guy is obviously senile. Why would you predict a stock to be worth its lowest price of all time when a brand new product is coming out and it is already 3x its lowest price? If anything RIMM has the potential to skyrocket and shoot up towards 60 dollars in the next few years. Its too bad you can't fix stupid.

JANUARY 22, 2013 7:03 P.M.

Anonymous wrote:

Is this a joke? hahaha that's funny.

JANUARY 22, 2013 7:10 P.M.

raul wrote:

who is jim suva and what are his credentials other than he works for citi. i know you can get a citi job for minimum wage and still be called a vice president.

JANUARY 22, 2013 7:12 P.M.

WhatAnIdiot wrote:

Suva has no clue what he is talking about? Chinese handset manufacturers are going to be threat at the lower end, so may be lower end BB 7 and earlier devices. We are looking forward to new BB10 devices and the fact is that BB10 is quite unique. Again, this moron needs to try BB10 at least once before writing this garbage.

JANUARY 22, 2013 7:45 P.M.

Caracticus wrote:

At the end of the day an Android is an Android is an Android. The difference with RIM and BB10 is that it is reengineered to be a one-thumb operation on a RTOS... the user experience adopts the best of Android, iOS, Windows Phone and the loved but lamented WebOS, put into a high performance package with exclusive software platforms like BBM and RIM's legendary email and messaging features.

To just cast this along side yet another android device (YAAD) shows an ignorance of what RIM's REAL goal here is: to shift from "mobile communications" to REAL "mobile computing" in a way that probably only Apple and Microsoft can deliver... all those poor Android manufacturers are going to a gray cloud of sameness, where the only winner is Google.

JANUARY 22, 2013 7:58 P.M.

Arvel-Niyogi wrote:

I own RIMM shares , I have bought it at high and bought more at 10.0 . All these comments remind me of one thing, there is a lot hoopla- buzz, with no basis. In 1970s when the wall street was down on a company called singer, and when it trading at a low of $6.0, I bought at low of $6.0 and sold it around $32.00 a year later. Later it went on to mid sixties and Bought over at 92.00 a share. I firmly believe that I WILL make a good money with RIMM.

JANUARY 22, 2013 8:15 P.M.

rimm is dead. question is when to short wrote:

think would be too late to short on release day. covered short from now might be an option.

JANUARY 22, 2013 8:24 P.M.

Anonymous wrote:

Really? A price target that is lower then its Cash On Hand, just before a MASSIVE Global product launch?

I can guarantee that this guy knows a few people who shorted the stock.

It's funny, because whenever this stock gets downgraded by some no name analyst, the stock rockets higher.

RIM gave 100 iPhone users a BB10 and asked them to play with it for 1 hour. When time was up, they asked the iPhone users if they wanted to keep BB10 in exchange for their iPhone.

91 (ninety-one) people said that they will trade their iPhone for a BB10 immediately.

There were given a voucher to exchange their iPhone for a BB10 once they are launch.

What a statement!

JANUARY 22, 2013 8:32 P.M.

Ben Johnston wrote:

RIM gave 100 iPhone users a BB10 and asked them to play with it for 1 hour. When time was up, they asked the iPhone users if they wanted to keep BB10 in exchange for their iPhone.

91 (ninety-one) people said that they will trade their iPhone for a BB10 immediately.

There were given a voucher to exchange their iPhone for a BB10 once they are launch.

What a statement!

JANUARY 22, 2013 8:33 P.M.

alwejflwaekf wrote:

@ KT "looks like you got caught shorting RIMM… HAHAHAHA"

Exactly lol

JANUARY 22, 2013 8:50 P.M.

business first wrote:

Mr. Juva;
Where were you when CITIgroup was being trashed? Please hold your advice and spend time analyzing a sick financial firm, CITI before starting to shoot at others.
With all the respect.

JANUARY 22, 2013 9:00 P.M.

Anonymous wrote:

One more idiot after that BMO analyst called Tim Long now jumped up on stage to show how he has been stupid retard. He didn't know what he was talking about only fearing his short position which is getting heavy and heavy in debt.

I guess he wrote this note he had watered his pant seeing rimm jumped more than $2 bucks a day!

JANUARY 22, 2013 9:32 P.M.

James wrote:

I agree with the author.

The Rimm debacle has all the symptoms of an end-time for a dying brand, last seen in the Palm debacle which was far more spectacular.

Rim is out of competition to any and all of the above. Reality does not move, therefore Rim and all its offerings and efforts are vain and totally ineffective just like its Playbook campaign.

Rimm will not pass its survival test, Rim will continue its trajectory into oblivion. There are no doubts.

JANUARY 22, 2013 10:14 P.M.

bobby wrote:

Citigroup‘s Jim Suva is still employed?

JANUARY 22, 2013 10:19 P.M.

moneybags wrote:

James, too bad you didn't choke on your supper.

Sent via BlackBerry Playbook.

JANUARY 22, 2013 10:32 P.M.

bobby wrote:

Citi needs a lot more restucturing.
What is a Citigroup client to do with such bizarre irrelevant judgement calls.

JANUARY 22, 2013 10:34 P.M.

rb wrote:

The buying public will decide...not a wall street firm whether long,short or neutral.

JANUARY 22, 2013 10:47 P.M.

BoldBuddha wrote:

If Suva and all the those Anals..were taking care of my portfolio and had advised me to buy RIMM when it was trading in low $6 and said that I will get a chance to exit pre BB10 launch on pure speculation, I would have some respect for their analysis. But now with the shares trading above $18 and calling RIM at $6.... It just makes me laugh. You are just being a Anal...ist
BlackBerry forever... For all the believers... Enjoy the ride but remember not to be too greedy

I understand if you feel the stock is way overvalued, but it's not going anywhere near $6, anytime soon. And Huawei having some pretty phones with nice specs are a non-factor as of now. What a joke.

JANUARY 22, 2013 11:57 P.M.

Intangible One wrote:

Lets think about this logically:

Worst case scenario:
Stock continues to trend upwards until BB10 release, the public rejects the product(s) and RIM tanks.

Best case scenario:
The public accept the device, demand rises and RIM rebounds back to pre 2009 levels.

Now, lets look at the specifics of this. Anticipation of the Z10 is only going to rise and rise and rise between now and release, so it is relatively safe to assume that the 19.50 target will be reached easily if not tomorrow than likely in the next three days. Realistically, I see this stock valued around 25.00 per share prior to release. Why? Because there is a huge potential for this stock to explode again.

Lets look a little closer at why this stock will continue to surge between now and the 30th:
- Z10 and BB10 are getting an enormous amount of press
- Z10 handset is getting excellent reviews; virtually all technical specifications meet or exceed the capabilities of any smartphone on the market today
- RIM has a contingency plan in the event that the product does not take (instilling confidence in investors)

If you understand anything about mass psychology, investing in RIM (even short term) is a no-brainer. Demand is still growing, anticipation is still growing, curiousity is growing and the potential for huge long gains are growing more and more as we near release.

Can RIMM hit 56 over the next year? Absolutely
Can RIMM fall back to 6 dollars over the next year? Yep

What matters is this:
- Will the public take to the new product?
- Will RIMM use this phone as a step to get back into the game but cease serious innovation once they get back into the game or continue staying ahead of the competition by developing high end products?

Any analyst posts you see between now and the 30th are clearly speculation for the above reason. That is what is exciting about stocks like this. There are no facts, there are no statistics and there are no arguments that could justify a "sell" status. It is an effort to drive down investor confidence.

Do I know what will happen on the 30th and onwards? No
But I feel confident enough to know what happens over the next 7 days.

Without bias, cheers,

BKS

JANUARY 23, 2013 12:04 A.M.

This writer is a joke wrote:

Clearly he shorted RIMM for a few million and NEEDS it to drop. "New devices with blah blah blah cheap prices" Buddy ... Are you retarded? Apple has the most expensive phone and is KILLING IT. You think so no names coming out with a cheap phone is going to kill RIM? Hahaha your a complete idiot and everything you stated in your post isn't backed up with a reasonable claim. I doubt if you actually know a significant amount of what is happening in the mobile market. Your an investor, it doesn't mean you know phone technology or the demand of it from the public. Go back to making 2% a year on GIC's and you wont have to SHORT a great company like this.

JANUARY 23, 2013 7:38 A.M.

Jeff wrote:

Sorry, I just don't see credibility in the recent run. As a professional at a company with 25,000 employees I can tell you that we have long since dumped RIMM and use phone of your choice with Good Technologies. I know many friends at other companies that have done the same. I don't see any demand on the personal side either but that's just from my own observations.

They are too far behind at this point and consumers and businesses have already moved on. Hell even Yahoo dropped blackberry's.

JANUARY 23, 2013 8:50 A.M.

Jesse wrote:

He's not impressed with "Fusion"? Good thing they just released BES10 today, ahead of schedule.

it's a giant piece of garbage. it looks like a BB, but doesn't perform like one.

JANUARY 23, 2013 10:06 A.M.

Corrupt Analysts wrote:

These analysts are reason for the average investor to keep savings under their bed rather than invest it in the stock market. They are utterly corrupt, manipulating stock as best they can to serve their own interests, such as a failed Short position many analysts took on RIMM.

How about quoting analysts with credible track records on RIMM instead, this guy missed the last 200% run up, why should we listen to him now? Too bad media outlets like Barons are using them as sources, it tarnishes their credibility too.

JANUARY 23, 2013 10:08 A.M.

logicfirst wrote:

Did you not comment RIMM would have burnt out all its cash by 2013!?
It's almost Feb, $2.9B in cash + roughly $1B in other negotiables (receivables)
Dude, enough of BS. Shares are surging since BB10 is a very competitive product many have been holding on to upgrade to.
Our small business has 13 lines and we didn't upgrade to get the best, fastest and most secure professional handset out there. Let me cut you a remindar. RIMM has over $6 in adjustable cash, assets, estates and patents. So you short its business sector into a value of say -$2B? Is that a joke or what? Prosperity for RIMM is at second to all time high.

JANUARY 23, 2013 10:19 A.M.

kevinish wrote:

No surpise here-Wall Street remains completely ignorant with regards to technology. No viable alternative to RIM exists with regard to the enterprise, and thanks to RIM's patent portfolio this won't change. But, coming froma 'Dead Man Walking' financial enterprise, this is no shocker. The Microsoft remark was the icing on the cake. It's no wonder Wall Street loathes organizations like facebook; they don't understand them-

JANUARY 23, 2013 10:31 A.M.

Timothy Stoyanovski wrote:

Jim Suva's knowledge on the mobile market is equivalent to Bill Gates training a sight-seeing dog.

JANUARY 23, 2013 12:08 P.M.

electro wrote:

What a scam ~ scotia pump followed by the Citi dump. I wonder who's making money here?

JANUARY 23, 2013 1:08 P.M.

electrowing wrote:

"The walking dead of Wall Street..." ~ i like that! By all indications and previews, RIMM has potentially the best phone on the market. We will know for sure after the release, but it might be a good time for AAPL to shift its focus from iPhone to iTV.

JANUARY 23, 2013 1:09 P.M.

Anonymous wrote:

It's kind of funny. Canada's Governor General and previous head of the University of Waterloo can go to Vietnam and other Third World countries on RIM's behalf but he can't be seen with the Prime Minister meeting with Canada's First Nations re 200 year old land treaties that have never been honored. Shame.

Re RIM's stock and their new devices. How about: Too much too late; at best. At best. And who will be buying will turn off who might be buying.

By the way. The new BB10 is designed for one thumb use. Great. If you lost your other thumb or were born with one thumb.

JANUARY 23, 2013 1:19 P.M.

Pete wrote:

I think there is still room for a high end smartphone that offers complete privacy and security of your information.All it will take is one scare on android where everyone loses their personal info to have people running and crying back to Rim. Also these phones are built to a much higher standard as is their software, you might have bad thoughts from back int he day when rim invented the smartphone, sure they were crude compared to the way they are now, but they didn't shatter at the drop of a hat and they didn' ask if a video came could read and send your call logs... If rim when under what would military and government all over the world do ? When rim was 6 it was a complete joke, their assets are worth more than that and they have regular income.

I don't think you teen daughter is going to be won over with a blackberry, then again, if they become stylish say because they look industrial, she even will go back to them.

The bottom line is there isn't alot of things bb10 won't be able to do taht other phones can, that will close the gap.

JANUARY 23, 2013 1:26 P.M.

electrowing wrote:

One finger or two ~ doesn't matter. BB10 has the first touch keypad that actually works!

JANUARY 23, 2013 2:58 P.M.

Anonymous wrote:

@ electrowing

Great. One big finger for you. By the way. Betcha Siri out performs BB10.

Siri was originally sponsored by the US Defence Delartment. It was the largest project of its sort in human history. It's a Do Engine.

Otherwise. You can eat me. That's what you can do.

JANUARY 23, 2013 4:19 P.M.

electrowing wrote:

Anonymous ~ i'll pass on that offer, gracious as you might think it is... i'm sure you can abuse yourself just fine without any help from me.

JANUARY 23, 2013 4:35 P.M.

electrowing wrote:

Personally, i'm tired of all the bubble gum hype surrounding iPhone, and there's nothing more annoying than txt messages full of typos from those apple/samsung keypads designed by intellectually challenged engineers.

The guy who wrote this article prolly has to call a technician every time his computer crashes.

My guess Citi is holding heavy on AAPL shares, hence the uninformed bashing ritual... and BTW i meant Suva (not the author) prolly needs a techie every time his computer crashes.

JANUARY 24, 2013 12:15 P.M.

electrowing wrote:

Looks like RIMM and Scotia Capital have far greater credibility than Citi. RIMM rallying again... You really know how to call them there, Mr. Suva.

JANUARY 25, 2013 10:19 A.M.

Y.P. wrote:

I'm tired of all this RIM bashing. Yes Apple have a lot of good things, samething for Samsung, Nokia... you can name them all. I really hope that RIM can pass trough this and succeed. Not for their benefits but for the customer itself. Mr Suva probably own a lot of Apple stock and he's watching the stock melting like snow under the sun. By the way Samsung with their new ad who's mocking about blackberry is prooving that they are affraid of the BB10 otherwise no one would care about. RIM is supposed te be dead since 2009 and they are still there. So if you have'nt tyried it yet, shut up and wait. If the product is not good enough they're gonna crash. But I still hope for a comeback from RIM and hoping that Apple stock will trend to it's real value I mean not more than 100$ a share.

JANUARY 27, 2013 12:00 P.M.

Jim Dubois wrote:

Suva and his $6 PT. Are you kidding me? Looks to me Citi or Citi's best clients have a large short position and they are underwater and bleeding red. Notice the timing of this ridiculous downgrade (just days before a new significant product launch of BB10).

Analysts have an agenda. To try to move the stock according to the FUD they spew out! DO NOT LISTEN TO ANALCYSTS! Do your own DD.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.